State BPU Wants to Whittle Down PSE&G's $2.6B Power-Grid Upgrade Plan

Agency's limit would hold state's largest utility to a budget of $1 billion over three years

Credit: Amanda Brown

BPU Commissioner Joseph Fiordaliso

The state wants to scale back plans by Public Service Electric & Gas to spend $2.6 billion over the next five years to harden its power grid to prevent the kind of widespread outages that occurred during Hurricane Sandy.

At a private settlement discussion on Wednesday among participants in the case, the New Jersey Board of Public Utilities said the plan should only allow approximately $1 billion in expenditures over the next three years, according to sources familiar with the case.

The position is at odds with that taken by PSE&G, which now is proposing to spend about $1.9 billion, the bulk of which would go to moving or protecting its utility substations, many of which were flooded during the superstorm, causing most of the outages affecting residents and businesses, sources said.

The PSE&G proposal filed nearly a year ago is the first initiative by one of the state’s utilities to detail a comprehensive plan to deal with issues raised by Sandy and other extreme weather. The plan, which initially proposed spending $3.9 billion over a decade, has won strong support from a score of municipalities, some counties, and most of the state’s largest business organizations.

But the proposal also has generated much opposition from consumer advocates, in part from the state Division of Rate Counsel, as well as large manufacturing interests who view the expenditures as raising what they consider already steep energy bills in New Jersey.

PSE&G repeatedly has said the expenditures will have little impact on customers’ bills, largely due to a big drop in natural gas prices as well as the elimination of a surcharge on ratepayers’ bills stemming from the deregulation of the energy sector 15 years ago.

With neither side in the issue appearing willing to compromise, it appears probable that the case will go before an administrative law court judge later this month, a course utilities usually hope to avoid because it increases litigations costs and extends the timeframe before they begin earning more from their customers.

Instead, parties to the case typically agree to a stipulated settlement that will bypass the evidentiary hearings, averting the expense of well-paid experts hired to bolster their respective arguments. The settlement, if approved by the administrative law court judge, goes to the BPU, which has the ultimate decision on the rate case.

None of the participants in the case contacted by NJ Spotlight were willing to comment on the record about the settlement discussions, largely based on an admonition by BPU Commissioner Joseph Fiordaliso, the presiding officer in the case, not to talk about the negotiations in public.

State offices were closed yesterday because of the snowstorm, so no one could be reached for comment, but BPU officials routinely decline to comment on pending rate cases.

PSE&G also declined comment. “Commissioner Fiordaliso insisted there be no discussions in public,’’ said Michael Jennings, a spokesman for the Newark-based company. “We’re going to respect that.’’

The case may be a harbinger of how far state officials will go in allowing new expenditures by utilities to prevent outages in the event of extreme weather. The BPU already has launched a separate proceeding into what the state’s utilities need to do to curtail widespread outages. In addition, the agency also is juggling several cases from both gas and electric utilities to recover nearly $1 billion spent restoring service from past storms.

Most of the $1.9 billion sought by PSE&G in the current rate case initially dealt with either relocating substations, elevating them, or creating flood barriers around them. In the state’s latest position, funds would be provided for fixing 18 substations, far fewer than the 29 substations recommended by the utility in its proposal, according to sources.